By Nathan Dufour, Polish Institute of International Affairs
Europe’s security services are blinded by their quest to prevent terrorism from striking again. The investigation to root out the perpetrators, launched by French security services following the November 13 attacks in Paris, is well-intentioned, but cracking down on Belgium and the district of Molenbeek-Saint-Jean in Brussels are playing straight into the hands of Isis, the Islamic militant group, and its quest for destabilisation.
Molenbeek-Saint-Jean, one of Brussels’s poorest and most Muslim-populated districts, fell under international condemnation for its role as a support base for the Paris attacks. Many accused Belgium of failures, using it to portray the inadequacies of Muslim integration in western Europe. However, to properly consider the issue and investigate durable solutions, shortcut explanations should be avoided. Instead, consider why Belgium and Molenbeek fit so conveniently in Isis’ broader destabilisation plans. Read more
By Chandran Nair, Global Institute for Tomorrow
Last week, Jack Ma called for a new “e-WTO” with the aim of helping small businesses get on the Internet, as the best hope in the fight against poverty. This appeal came after Alibaba’s largest ever “Singles Day” a week earlier, with almost US$14.3bn of merchandise sold in 24 hours. Alibaba’s social media accounts even reported that Premier Li Keqiang called CEO Jack Ma to wish him a successful day. “Singles Day” is now the world’s largest shopping day, dwarfing even the United States’ “Black Friday.”
These are the latest manifestations of a worrying obsession with e-commerce and the Internet in Asia’s largest economies. In March, Beijing announced its new “Internet Plus” plan to expand Internet connectivity. Premier Li, when describing it, brought up the “mobile Internet”, “cloud computing”, “big data”, “intelligent manufacturing” and the “Internet of Things,” in a manner similar to business leaders in America. Nor is this digital obsession restricted to China. Indian Prime Minister Narendra Modi’s meeting with Mark Zuckerberg at Facebook’s headquarters received as much, if not more, media attention as his address on sustainable development to the United Nations days earlier. Read more
There has been much focus on the price of iron ore recently, and understandably so. Cooling Chinese demand at a time of surging Australian supply saw spot prices fall to a new nadir of $44 a tonne CFR (cost and freight) for delivery in North China on Tuesday, November 24, according to Platts data.
In an effort to survive this price environment, smaller iron ore miners are trying to diversify their portfolios, with some buying up cattle and dairy businesses to cash in on rising Asian demand for other commodities. At the same time, steel mills have been using this cost advantage, and structural supply surplus, to pour steel into the global market, as has been well publicised.
However, ferrous scrap – which accounts for around a third of steel production outside China – has been comparatively overlooked by commentators. Read more
On the day of the Paris terror attacks US Secretary of State John Kerry visited Tunisia, five years after the Arab Spring erupted and months after Tunisia’s own Isis assaults on prominent tourist sites. Kerry pledged additional security and economic support as the US Congress considers a package doubling it to $135bn next year, and hailed the country’s political transition that earned those in charge the Nobel Peace Prize.
However, one in three members of the Nidaa Tounes party in Tunisia’s ruling coalition resigned before Kerry’s arrival to protest continued corruption and economic stagnation, and development initiatives were largely confined to another sovereign bond guarantee and backing for IMF, World Bank and other assistance programmes in place for several years with mixed results. Although Washington is willing to underwrite commercial debt, it could go much further in promoting local financial market development, in particular in partnership with private sector banks and fund managers who have been absent, as a wholesale rethink of post-Arab Spring aid for Tunisia and its neighbours is long overdue. Read more
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Ukraine faces a moment of truth, as the first domestic energy bills to include the large increase in tariffs announced earlier this year reached hard-pressed consumers this month. We are entering the period in which the will of the country to carry out badly needed reforms will be tested against its ability to absorb the inevitable shocks and pain involved.
Raising energy tariffs to market rates is the single most important reform Ukraine has carried out so far, enabling it to root out corruption, cut waste and strengthen public finances. But the measure is deeply unpopular and unscrupulous politicians have been more than ready to exploit that fact. Read more
Could a banking crisis erupt in China? The commonly accepted answer among western analysts is no, for the simple reason that China has huge State owned banks that dominate the country’s banking industry. But dig a little deeper and a different picture emerges.
It turns out that within China’s smaller cities, the market share of the big banks fades away. Instead, local banks take over. With few national branches, these local banks will have a much more difficult time spreading risk geographically, and are thus more prone to failure.
While there is very little information on local finances, we examined the IPO prospectuses for several banks about to list in Hong Kong and unearthed a treasure trove of information on the geographical breakdown of China’s banking system. Read more
Few would disagree that Brazil is going through a deep crisis. In 2002-2010, per capita income grew 2.7 per cent a year. In 2011-2013 it slowed to 1.8 per cent a year and in 2014-2015 it will contract a staggering 2.3 per cent a year. Unfortunately, projections suggest it is unlikely to recover to the level of 2013 before 2022.
There are disagreements, however, on the causes of this crisis. For many, it is above all political. For them, the economy requires first a solution to Brazil’s political nightmare and, then, adjustments rather than actual reforms to get back on track and regain the confidence of investors. Read more
The creation of a slavery and human trafficking statement is now compulsory for all UK businesses with a turnover of over £36m, as stated by the Modern Slavery Act. However, unless enforced, this already diluted piece of legislation will have little effect on working practices and is open to abuse.
Modern slavery, although widely condemned as morally indefensible by UK businesses, is still rife in global industry. The International Labour Organisation estimates that over 20m people are trapped in a form of slavery worldwide, a view reinforced by countless exposés of the abhorrent working conditions present in western supply chains. Just last year, a report by NGO Verité suggested that a third of migrants working in Malaysian electronics factories were subject to forced labour. Read more
India is an enticing prospect for many digital content brands today. With nearly a sixth of the world’s population and a rapidly growing number of consumers coming online for the first time, having a presence in this market is crucial for future growth.
Netflix has been announcing updates to its platform, demonstrating a willingness to find the best approach to consumers in high-growth markets. The announcements have included the introduction of carrier billing and in-app subscription sign-ups. Perhaps most significantly, this month Reed Hasting, Netflix CEO, said the company would like to create Bollywood content – the strongest signal yet that it is serious about becoming a major player in India. Read more
Moscow seems intent on re-engaging with the international community after being relegated to the sidelines following the conflict in Ukraine. The Kremlin is not necessarily becoming more accommodative to the west, but there are changes in several areas that suggest President Vladimir Putin wants to play a more active role internationally.
The fight against global terrorism is the most recent and perhaps most significant example of how Putin has re-emerged as a key player. His role at the recent G20 meeting in Ankara stands in stark contrast to the meeting in Brisbane a year ago when he left early after being shunned by the other leaders. Russia has also tried to play a more active role in the Middle East. Moscow proved productive in the Iran negotiations over the summer and that Russia is now circulating a proposed constitutional reform plan for Syria in the UN points in the same direction. Read more
To hear some Russia watchers say it, Vladimir Putin will fight to the last Russian air bomb to keep Bashar al-Assad of Syria in power. But will he?
I argue not only that Putin could and should let Assad go, but also that Putin’s own record of behind-the-door diplomacy offers a clue as to how the Syrian dictator could step aside without losing face. Read more
The European Union finds itself in the midst of multiple crises. It might be torn apart by the refugee crisis, the rise of nationalistic populism in Central Europe, the repercussions of a possible Brexit, or by the return, in some form, of the debt crisis that has been ravaging Greece for over five years now. However, the risk that these crises pose to the EU is eclipsed by their cumulative effect on the EU’s neighbours, especially Ukraine.
In all likelihood, the EU will eventually muddle its way out of its current troubles. In the process, however, it is bound to become more inward-looking and wary of engaging its eastern partners. The united front that the EU has shown in the aftermath of Russia’s invasion of Ukraine is fragile. Sooner or later, it will be replaced by a cruder form of realism that will put the immediate German or French ‘national interest’ first, effectively rewarding Vladimir Putin for his aggression. Read more
The tragic crash of Metrojet Flight 9268 in Sinai, killing 224 people, looks increasingly to be the result of foul play by Isis. This has troubling implications for Egypt and the broader region and highlights key structural shifts in the “War on Terror”.
In a previous column for beyondbrics we highlighted our fears that Egypt was on a road disturbingly similar to that of Algeria in the 1990s, when hundreds of thousands died in a civil war. We identified the Egyptian tourism sector, which makes up over 11 per cent of GDP, as a prime target for Isis. Read more
The mass movement of millions of refugees from Syria and Iraq has been perplexing politicians and exasperating economists for months. Who will take them and how many are questions that now make the Greek debt crisis look like dry rot in a house on fire – and as winter approaches, the situation is getting more serious by the day.
While western leaders quarrel over a solution, they are overlooking a country that earlier this year was the centre of yet another argument: Ukraine. Read more
Education policymakers worldwide often make a pilgrimage of sorts to Finland and Singapore to learn about their high performing education systems. These states consistently do well in PISA tests, which are organised by the OECD every three years to measure and compare the competencies of 15-year-olds worldwide. There is no doubt that their achievements are impressive, but there is more to be said for examining places that are rapidly improving rather than those that are already highly effective. This week, CfBT Education Trust published a report exploring school reform in five world cities including three in emerging markets, where there has been rapid improvement in recent years.
Despite enormous diversity, the report has identified seven common trends that link educational success in each of these places. Strong leadership, commitment to reform and collaboration between schools are among the factors that have driven up standards. These cities have used education to break the link between poverty and attainment in a way that has not be done before and which could have profound implications for social mobility and their social and economic structures. Innovation and creativity have set new standards in these cities which could be applied in emerging markets across the world. Read more
By Camilla Hagelund,Verisk Maplecroft
In the face of his country’s ongoing economic turmoil, Kazakh President Nazarbayev is engaging in fast-paced diplomacy to boost his country’s growth prospects. Hot on the heels of high-level bilateral meetings with the US, Japan and Qatar, he has attempted to position Kazakhstan as a land of opportunity for British business during his official visit to the UK this week.
However, while the Kazakh government is actively working to improve the environment for foreign investors, deep-seated deficiencies in the rule of law remain a serious barrier to investment.
Nazarbayev’s roadshow is an attempt to diversify the economy and shore up investment to offset the impact of persistently low oil prices, which have cut the country’s foreign trade surplus by more than 60 per cent and caused budget revenues to plummet by 40 per cent this year. As a result, GDP is projected to expand by just 1.3 per cent in 2015, down from 4.3 per cent last year and 6 per cent in 2013. Read more
By Spencer Lake, HSBC
China’s recent stock market and foreign exchange developments have drawn the attention away from a major development in another part of the country’s capital markets: the further opening-up of the bond market to foreign investors.
In July, the People’s Bank of China (PBoC) announced that certain foreign institutions – including central banks, sovereign wealth funds and international financial institutions – would have open access to the interbank debt market, where the vast majority of China’s government and corporate bonds are traded.
This is China’s latest measure to integrate its capital markets into the global financial system. Read more
For both liberals and conservatives in the Russian government, western sanctions and oil price volatility present new challenges and opportunities. Both camps hold the key to Russia’s economic and political stability.
The conservatives, led by Igor Sechin, dominate the oil industry through the state-controlled national champion Rosneft, where Sechin is chief executive. The liberals, represented by prime minister Dmitry Medvedev, finance minister Anton Siluanov, deputy prime minister Arkady Dvorkovich and central bank governor Elvira Nabiullina, steer the country’s fiscal and monetary policies. Read more
Auto manufacturers, their suppliers and investors need to prepare themselves for a triple shock from China’s slowing economy.
The first shock is already under way. As the chart below shows, China’s slowdown has caused passenger car volumes to decline in the Bric economies – which accounted for one in three global sales last year. Volumes in Brazil and Russia have collapsed as their commodity exports have tumbled: Brazil’s sales are down 23 per cent and Russia’s down 33 per cent (January – September 2015 versus 2014). China’s market has also clearly plateaued. New car sales have fallen in three of the past four months and inventories are close to record levels. India’s sales are the only bright spot, up 7 per cent this year, but India’s market is just a tenth of total Bric volume. Read more